Entain (LSE: ENT) shareholders are having a cracking week. By midday Wednesday, the Entain share price had soared by 27% in less than two days. We’re now looking at a 230% rise in two years.
It’s all about a takeover approach from US sports betting company DraftKings. The story, revealed by CNBC on Monday afternoon, put the alleged value at $20bn. The deal, according to the news source, would be mainly in DraftKings shares, but with some sort of cash sweetener included. Entain confirmed the rumours of an approach later the same afternoon.
Entain, the owner of brands including Coral, Ladbrokes, and bwin, was the subject of an all-share offer from MGM Resorts earlier in the year. That bid had valued the company at a much lower $11bn.
On Wednesday, Entain fleshed out the details of the new DraftKings approach. The company says that, following an rejected first proposal, DraftKings has offered the equivalent of 2,800p per share. Only 630p of that would be payable in cash, with the rest coming in the form of new DraftKings Class A common shares.
DraftKings made this latest offer on 19 September. And Entain reckons it values the shares at a 46.2% premium to the closing price on 20 September. That makes the Entain share price rise since Monday look modest. And it suggests there might be a fair bit more value to be had for anyone buying even at this late stage in the proceedings.
Mounting a defence?
So does that mean I can simply buy now and pocket the difference when the buyout is complete? Well, we’re still some way from a done deal, and the story is not over for the Entain share price.
In Wednesday’s update, the company said: “The Board of Entain will carefully consider the proposal and a further announcement will be made as and when appropriate. Shareholders are urged to take no action at this time.“
It added: “This announcement has been made without the consent of DraftKings and there can be no certainty that any offer will be made for the Company, nor as to the terms on which any such offer may be made.”
Entain’s announcement went to lengths to emphasise the prospects for the company as it stands, speaking of “a strong track record of growth and runway for further significant growth.” It also suggested it has “the potential for its total addressable market to grow by more than three times to $160bn.”
Entain share price still cheap?
What do I make of that? I can’t help thinking the Entain board is drawing up some defence battle lines here. And the market reaction suggests others see the same thing. The Entain share price leap is impressive. But it is still way short of the DraftKings offer in terms of total valuation. Investors confident that a deal will go ahead would surely not hold back that much, would they?
What would I do? I’m going to do nothing but watch. Buying in the hope of a takeover can certainly provide the chance of a quick profit. But if an approach like this should fail to go ahead, the share price is likely to fall back again.